Worries Over Protectionism Mar Signing Of Global Trade Pact

AS ministers of 125 countries gather here to sign the Uruguay Round accord on world trade liberalization, the euphoria following the successful conclusion of negotiations in December is tempered by renewed worries of protectionism.

Trade officials at a four-day meeting leading to Friday's signing of the General Agreement on Tariffs and Trade (GATT) pact tout the gains for freer trade. But behind the positive words, they wonder whether the new provisions will accomplish their task: to break down barriers and stimulate broader global prosperity.

``There was great optimism that we were heading toward a new era of liberalized markets, multilateral rules, and much stronger guidelines for international dispute settlement,'' says Vincent Cable, director of the economic program at the Royal Institute for International Studies in London. ``Now there are growing worries we've gone backward since December.''

The tough trade stand taken this year by the United States toward Japan, over market access, and toward China, over human rights issues, is cited by many trade specialists as a dark cloud over prospects for multilateral trade regulation.

Creation of a World Trade Organization next year as a permanent trade-regulating body to replace the GATT was supposed to represent the dawning of a new era of trade multilateralism. Under the WTO, trade disputes between nations are to be reviewed and judged by the multilateral organization.

US trade retaliation

But since December, the US has insisted its ``Super 301'' trade law authorizing retaliatory measures in bilateral trade disputes remains applicable even under the GATT pact, and it has revived the law in its trade conflict with Japan. Now some members of the European Union (EU), while criticizing the US view, say Europe will have no choice but to adopt similar legislation of its own.

Another worrying sign, according to trade analysts, is the recent row that pitted developing countries against some wealthier ones, led by the US and France, over inclusion of a ``social clause'' on workers' basic rights in the Marrakesh meeting's final declaration.

The sensitive issue was finally resolved among GATT members last week with a fudge that allows workers' rights to be cited as an eventual area of attention for the future WTO, but with no formal ``social clause'' figuring in the ministers' final text.

For many developing countries, what they saw as the West's ``sudden'' interest in work-related social issues was a clear signal that, Uruguay Round or not, the world's traditional trade powers intend to maintain their dominant position.

``Western interest in a `social clause' is universally interpreted in the developing world as a new form of protectionism,'' says Jacques Pelkmans, an international trade specialist at the Center for European Policy Studies in Brussels. The Far East Economic Review last week titled an editorial on the topic ``Protection in Disguise,'' while leaders like Maylasian Prime Minister Mahathir Mohamad and Indian Prime Minister Narasimha Rao publicly accuse the world's wealthy of seeking to ``deny us our sole competitive advantage,'' low-cost labor.

Western leaders, led by US Trade Representative Mickey Kantor, insist they simply want to begin looking at the link between international trade and work conditions. Trade should not grow, they add, at the cost of more child, prison, or sweatshop labor.

Yet beyond the merits of the debate, the ``social clause'' controversy stands as a harbinger of the kind of conflict that is likely to recur as trade grows and the world economic balance continues a shift toward newly industrialized Asia. ``They may have defused the problem so it won't ruin Marrakesh,'' Mr. Cable says, ``but it's going to become an even more important issue.''

A question of access

Other rumblings will trouble the merriment in Marrakesh. Most countries are expressing disappointment in their trade partners' offers of market access, and the EU even plans to reduce its earlier offers of opening up its copper and trucks markets based on what it considers a poor US offer. And question marks continue to hang over the round's ratification prospects in the US Congress, the European Parliament, and in India, which was shaken last week by violent anti-GATT protests.

Still, most observers agree the round's signing will also mark some noteworthy improvements in the international trade environment - and should represent the opening of a new road for international trade.

First, agreement on the Uruguay Round cut short a potentially devastating US-EU trade battle that threatened to degenerate into an international trade war.

In a further sign of improved US-EU trade relations, the two trade giants are expected to reach agreement later this week in Marrakesh on opening up government procurement contracts. The accord is expected to open more than $200 billion in annual public works projects to foreign bidding.

Ministers will also endorse a working program for addressing the link between trade and the environment - another issue that had threatened to derail the signing.

Promise of free trade

But it is international trade's ``new road'' that offers the most promise, analysts say - provided the GATT's 120 members are serious about applying what they have agreed to on paper.

``After Marrakesh, a completely new machinery will be in place, with new dispute settlement powers and regular ministerial meetings to keep up momentum, but it could still fail to operate without world leadership,'' Mr. Pelkmans says.

``The improvements in market access and a strengthening of rules for governing international trade are two reasons we believe there is promise of progress,'' Indian Ambassador B. K. Zutshi adds. ``We'll have to see how it works out in the application.''